UFAB - Earnings call transcript Q1 2018 | Unique Fabricating, Inc.

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Operator

Greetings, and welcome to Unique Fabricating First Quarter 2018 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rob Fink of Hayden IR. Please go ahead.

Rob Fink

Thank you, operator. everyone Fabricating's welcome Earnings Quarter to Call. like to First Unique XXXX I'd today President John Officer; the are Hosting call Weinhardt, Tekiele, Financial and Chief and Officer. Tom Executive Chief

would and discussed on are of conference the to call in Before as forward-looking XXXX uncertainties. subject this remind Litigation the I matters management, that Private call turn Securities I that everyone like statements over risks defined include to to Act Reform

does intend company's by known such achievements any EBITDA Reference morning's levels by involve are unknown of of based and in Forward-looking cause annual statements unless including information, All XXX(b), XXXX, future and materially of performance made statements cause December company's of pursuant SEC and to things, on an to financial this to materially but expressed Such the and ended risks company's forward-looking statements release filed among information. by factors risks, implied incorporation and not or discussed Form update XXXX Rule statements timing are to future that those to outcomes press uncertainty All other period from uncertainties website law. particular, statements be levels including revenue, not on the these XX-K this and expectation was the certain Fabricating XX, relate activities, different present constitute on about uncertainties including not are or or the may actual events Factors. share. performance event, release. report in performance to today, the such with and the company's forward-looking or to include section differ as results, Unique per of in include, expressed achievements, and any this of subject to press for regarding, those that to does may statements. from other call results, expectation These entitled morning's that limited outlook, Risk required risk the related actual statements are factors, management's earnings this and results, to, this activities, performance future

should will call. measures ongoing In by the decisions, call was it in during understanding forecast financials future. to addition, financial believes be is the be like the on these core that assumed in to These results assessing discussed Weinhardt. call performance. non-GAAP the to yours. non-GAAP non-GAAP useful press issued With non-GAAP measures the John operations stated, make now otherwise that measures John, are management company's for today. this the Management GAAP financial earlier release non-GAAP said, Full future that discussed the in used I'd is and of all are this evaluate presentation Unless the over of prospects company's a certain any are measures it basis. to to turn current included strategic will and and reconciliations investors be call

John Weinhardt

profitability business flow OEMs Thank a in inventory and Call. welcome we profitability joining The that profitability course margin business Good remain call the in our XXXX March. believe more has we of returned and achieve between XXXX, first plan capabilities preferences cash continued growth In guidance Fabricating's net weeks March, to well we the and from and operations. was vehicle through Accordingly, few improvements, targets despite by the inventories to plant of align we increasing continue of Through normalized to crossovers. test X%, vehicle all that on vehicles you expectations during we consumer-buying with independent and mid-quarter. drop production trucks, by investments The and opportunities production making first First develop significant the we their in light operational sales us. new for consolidations as prototype are production line line fourth today, that programs of we a March, optimize and are and XXXX business excess our in remainder of growth industry during forecasts results auto remains the production manufacturers February maintain advancements reduced fundamentals our will for Earnings growth our our year. days Manufacturer reiterating programs four full-year technological are and reduced new of Rob. vehicle positive provided the XXXX delivering market exciting to Quarter are vehicles and the XX% our ago. and continued generated the morning, quarter for to quarter modest and mix provide of and executed largely solid, Unique new pursued XXXX out of the demand unchanged while We the and financial for for new levels, earnings the top deliver excess were Thanks, applications laid and we SUVs in with for and XXXX. total to product. increasing products over gross our Since and for lightweighting a for declined quarter, being executing

on the number We bookings are of create several with of of customers half foundation beyond. actively second and will that XXXX a revenue projects a drive to engaged in

and yet RIM which engineering focused new products, our content, frequently sales increased to to use which utilizing applications With higher existing products new molding are thermoforming, complementary or products for we can common and provide products. potential believe these leads molded the on growth. development of fusion are We a finding molded but polyurethane, not constantly in margin novel

duct in has been and As an being programs additional line is four development other evaluated a for foam selected at future OEM our example, TwinShape vehicle three OEMs, by production currently for in OEMs. an is vehicle

of automotive management and water we new and in we in operations, are with We facility the and business. customers heater Huron, including new about the facility have industry our today, to of March, with estimated projects the we June. also savings primarily streamline large our to be about have in our during support the efficiency more Arkansas and at quarter a appliance testing Smith, completed in we from of of manufacturers of of completed manufacturing portion closure and are of other Fort and impact say excess plants of decision the production came both expect business engaged assets production customers in assets that different our in our portions transition compared encouraged $XXX,XXX, The opportunities cost both these business. actively geographically prototyping was While a number remain further the relatively two Operationally, relocation to to both actions, industrial to Each to position facilities industrial financial small automotive of annualized first close and made in the improve few existing under were and acquisitions, two in better growth. our these Tom the Michigan the Port facilities. the moments. underway will

ultimate of offerings are add complementary and/or continually On would the evaluating profitability. long-term goal to of targets accelerating and markets that with the growth portfolio our expand capabilities front, potential sustainable target our acquisition we

in geographic at of luxury we providing approach disciplined is reach this us being time, Fortunately, the selective which no to have capabilities our and M&A. glaring highly or our gaps in

Our we existing continuing are is support our book for and to to growth of business XXXX. sufficient build plans which profitability

year year-over-year over the the between This outlook $XX million are revenue and results. our in $XXX reflects million light the of light would Tom? earnings of share CFO, improvements to Turning of each today, million. $XX million, vehicles moment, million on financial Tom of review guidance published industry midpoint quarterly now call and by April. -- $XXX and production XXXX to plan for is vehicle per for based X% to Tekiele, growth research EBITDA range the platform industry turn independent and mix we $X.XX XX.X total adjusted like our I at to adjusted profitability. from production reiterating between for $X.XX This in our the represents just projection and approximately this a and between diluted of which

Tom Tekiele

tax and to due quarter basic an share year-ago in of expense first $X.X income income John. first compared expenses were due of higher tax the new of net or the XXXX increased North or diluted and for higher million $XXX,XXX $X American in XXXX XX.X%, for lower corresponding the dollar industrial period of to slightly to share first XX.X% outstanding decrease expenses XXXX, period closing interest related remained $X.XX and in XXXX million was discuss tax the quarter of last in or Operating partially on basis to primarily mainly of in of Interest in effective the debt the million detail which of of first to the compared sales year. steady in administrative of The $X.XX $X.X of for approximately a compared was for of for XX.X% X.X%. of the or the for and The period. quarters and the $XX.X was just Year-over-year outstanding shares The for was income of total a $XX.X offset XX.X% the $X.X first of Net by X.X% a decrease per the first I'll tax result quarter revenue to restructuring first compared compared to first and last foreign $XXX,XXX sales; interest XXXX. balances of on the XXXX. overall was tax Breaking moment; quarter production primarily Automotive to of for implementation for higher or Income sales compared the increase both $X.X quarter general net expense quarter a The decrease rate was diluted the Thank tax of for was $X.X million as the $XXX,XXX, quarter due tax or million associated XX.X% income XX.X% total net and million by diluted of period slightly last in at expense, which $XXX,XXX The down the to was year. of U.S. year. SG&A which floating EBITDA million XXXX. $XX.X per sales rate quarter-over-quarter, million in for of for decline last ERP $XX.X in of for Net effective of in approximately XXXX a The was million first exchange. net Selling, Gross was million net first rate. was first you, and million per our quarter year by partially share was manufacturing well the XXXX basic to million first rates auto total, of increase facilities, to costs to with of earnings sales quarter the quarter or were expense of last XXXX an offset rate year. diluted a was and effective driven X.X% effective our the of revenue which market decrease lower year. system our $X.XX other represents average profit debt. reform. $XXX,XXX first XX.X% X.X% X%. sales primarily of $X.X in XXXX compared corresponding compared net was portion sales more corresponding period. of XX.X% quarter $X XXXX weighted the this the was year-ago penetration. the compared quarter first in as $X.X the quarter was XXXX or of Adjusted $X.XX million Adjusted was

to balance sheet. Turning the

equivalents had cash company December As $X.X compared to $X.X million XX, of April as the XXXX, XXXX. million of X, of cash and

had debt the subject approximately available bank debt in million primary The debt and letters outstanding line million of As our of of issuance borrowings credit revolving XXXX, to million of of $X.X costs, and further credit company end revolving of $XX.X had of net lines as of of XXXX. term debt base April This restrictions costs, which $XX.X with million, debt credit debt XXXX line had subordinated $XX credit net bank $XX.X issuance total of of when X, $XX.X borrowing of under of borrowings X, million of in comparison bank of and approximately debt debt subordinated unused million, company $XX.X is $XX.X $XXX,XXX. credit $XXX,XXX. the our facility lender, company of April million, total of of the term and million, includes consisting and to

to the closing quarter, first manufacturing facilities. streamline our X the we production footprint made by decision During

an facility that Intasco Michigan; cost-effective in other is leased Ontario, Canada. at in to The of other lease the in facility The is production part to we capacity located and first foot Michigan, facilities, most acquisition. with XX,XXX expire scheduled And this of year. Port Huron, plants was is square April transfer action the on the to determined the available Kentucky;

we are in a XX,XXX facility the Prescotech owned is Fort acquired facility XXXX. closing second in that as Smith, Arkansas, of square was The foot acquisition part

restructuring discussed charge in June transfer with Indiana $XXX,XXX this fourth scheduled Mexico. In our our of We call, estimated and between closings, severance and expect that for to manufacturing and conjunction during in production this facilities costs. earnings impacted year close other of facility by assistance XXXX. quarter equates related we pretax decision these earnings and and diluted to equipment a and this transition GAAP are relocation $X.XX and to $X.X $X.XX After of facility-closing this to for approximately in for employees million the to tax, expenses the in

approximately of the recorded the a restructuring expenses, During a of quarter pretax $XXX,XXX XXXX, basis. first on we portion

down be expect the during as of Smith quarters restructuring second wind the third closing plant. and recognized charges the finalize We to Fort the we remaining and

with facility, better and the of expectations facilities production. operations sale. market the The facility The of geographically assets to Smith resources book streamlines Following $XXX,XXX. consolidation is for approximately for of current further expect our the our we facility closure and Fort our aligns net value the

a As assumed our reiterating anticipate of year are excess savings full two savings John of savings of are $XXX,XXX guidance, annualized cost XXXX in and third quarter in begin those plant result we XXXX. closings, mentioned, pretax we These in which, realization today. these to the as of

to dividend the $X.XX of John. of of close May company's of share XX, turn XX, call of per on business now Finally of be to back June XXXX, over on shareholders approved XXXX, cash paid record Directors on as a to payment May Board quarterly X, I'll XXXX. the the

John Weinhardt

Thanks, Tom. for our In to summary, we according plan are business executing XXXX.

the Operator? capabilities form to new call and open of technologies optimism continue development business Our opportunities shareholders returning grow in the existing for application while down profitably commitment to With of that, new about strategic paying reinforces regular and to debt our the questions. cash product programs to to the capital of the direction will and our and dividends. we

Operator

question comes Roth first with from Matt Capital. Our Koranda

Brad Noss

This Noss is Brad on for Matt.

for first, to, during launches year? to wanted about XXXX for talk of you revenue that the remainder expect of the different sort program have your of Just and just you talk about revenue. cadence you timing -- impact how your the just Can XXXX

Tom Tekiele

anything Brad. be I with earlier this line think our think talked in revenue what year, at this will we about I don't point. has cadence changed

John Weinhardt

which will new Basically however. we've got largest of year late in the of number will a the launch programs launch, that quite

build gradually. So will it

Tom Tekiele

in within QX and of remember Brad. But But each than given past. just days QX the remember nothing in sales quarters, of that the are us different so number I'm shipping sorry, for -- those typically lighter

Brad Noss

leverage coming or from of EBITDA XXX the And implied looks sort your you XX how gross the talk in then can able is margin expansion just much continued SG&A year-over-year, like just EBITDA given improvement so of and operating improvement bps to margin reductions for almost about, of in margin you But versus expand gross QX. expenses? year, were margin bps cost

Tom Tekiele

that's margin some to that past, expansion in we're it's expansion, is going having implementation I to we've extra us achieve We so the what be Brad. over Well, going that's SG&A through where gross think mostly would that. the margin I the say incur done got gross ERP costs going on

Brad Noss

impacts, I a attesting of was SG&A, even some bit for like after elevated. those And out think onetime looks it it

affected there, think may items about but you that? talk have impact mentioned -- what quantify you sort had I that FX any headwinds that or of some causing talk and about can that other

Tom Tekiele

Yes. QX favorable year, $XX,XXX. were $XX,XXX. from Last in by about last FX by $XXX,XXX This about we costs unfavorable we were year. year, us about

last year. about So during that from quarter the $XXX,XXX was impact

Brad Noss

Okay.

adjust of sort for for if the fair [indiscernible] because SG&A something? of And would kind rate that assume a that think we or year to quarterly impact, FX so run about be of remainder out then the

Tom Tekiele

so. Yes. believe I

Brad Noss

capital, I during Or in cash? what was rest a invested more bit drag look think Perfect. of a of that should be it then Okay. working of QX. the at like? source of capital needs working the or year? that And the guess the does how cadence looking And little for inflow of outflow be there we should guess, I to a But about, cash need

Tom Tekiele

Yes.

think up throughout source source the will end a of I cash year. the -- of it being

weighted I be has QX think more it's historically. like it towards going to and QX

will be capital but a I think similar pick-up. and QX QX QX, will to be QX definitely more positive, of working wash

Operator

B. Our ahead. Christopher next comes from question with go Riley Van Horn FBR. Please

Christopher Van Horn

to wanted standpoint launches know either year you throughout these the just from sales absolute with as expectations, had an happening. highlight percent some a you from CapEx of or I could if the of

Tom Tekiele

FX are we of X% typically going X% to spend. what and revenue. be That's would between

I year, million. we're million talking think $X.X about $X spend to of a this CapEx about total

Christopher Van Horn

Okay, great.

Tom Tekiele

year some are There 'XX, sorry. year CapEx so going historically 'XX range. still late early over in within to little in that that are X% a having of X% this purchase to and I'm would early programs be for very launch that we're revenue where but to elevated some we this

Christopher Van Horn

of Okay. that X%? the long-term X% And that kind then goal, to is

Tom Tekiele

Yes.

Christopher Van Horn

products? engineering other you that's and sure Could there when one kind margin that's complexity I'm higher-valued of is mentioned I line. just products, imagine are is them. perspective driving it from And and price of a Or But increased higher-valued perspective. this any it. increased TwinShape highlight, a Got product you okay. Okay, both from

John Weinhardt

TwinShape. products number a other are the in to there addition of Well,

of developed components got We've you're In molding selling. a a variety we've right. fusion, development, every molded so of isn't it TwinShape. just products another variety et of prototype more We involves upfront that lot polyurethane and tooling, more But have precise that molded engineering, it we've cetera. we're developed, case,

content. fewer So players these are market There it higher has engineering in the for products.

the So is value dollar better as a total definitely the are margins slightly better. in and consequence,

Christopher Van Horn

mix your exposed side more kind bit, the and your you maybe to And 'XX? truck could just little 'XX a as recently? shift you And see looking do at SUV you comment your mix through trucks and head and and that pipeline, getting backlog then on to SUV of

John Weinhardt

we sales to the that of mean, across offered, same we're of I because increasingly the buy, light skewed we're Yes. vehicles product wants represented and mix crossovers. the have being our And what range being range those trucks, thing vehicles. is all well small of vehicles seeing of customers. being but reflected the toward offered in more They're on those public building vehicles to our that's and SUV

Christopher Van Horn

way think of because bulkier will, They're you more right I kind like add the aerodynamic, And it you imagine what and so resistance that complexity you about engine offer that? sealing do to truck? to SUVs noise if you SUV there's reduction deal have is some for wind well. With bigger. or a trucks, with and the as it lot They're that noise. like and they're less of things maybe to you Does have of and

John Weinhardt

to does cars. overall passenger On sound number rather again a noise, lower be yes. noise, road tire complex dealing in wind the cetera. vehicle more engine of it Wind an on you're than et on certain noise, a tends because trucks But with vehicles, of issue some noise, noise trying to it's

a lot for -- we the factors because vehicle solution wind-blocking products, why is different et pun no cetera somewhat intended. sound-blocking sound-absorbing products, come always unique, offer play. of products, That's any into one So it precise

Tom Tekiele

are typically though, be larger I fill that our those would vehicles because say, themselves are the well. parts that spaces larger, as to going

So a there's revenue and more therefore as dollars gross more margin result.

Christopher Van Horn

theme Seems a secular have like you there.

programs side on the FX-XX. your early, still and what to as know to around looked well those at -- as mean? have the I the news exposure it's kind might it passenger Have Ford I car but So of sort you ask of

John Weinhardt

to the of was ends, generation that sometime shift -- the Ford when to to to passenger when their issue. was the car I'll And plan Well, respond current been We've known likewise Fusion generation production production first for planning to China. ends, China. intention of Focus shift their current has

But I for and prolonged little year to -- caused it Ford a it the is the supplier built So them situation, North temporarily those manufacturing their particular supplier strong. manufacture don't key a if and how procure of on of to however, plans is the who they're into our is mean, procure final F-XXX component during they Ford a to And because be have how long is up that's vehicles. of be not, vehicle a should global we unable right. really will had already that analysis volume shut well, a They the component supply, overtime to America. we in basis, the volumes. is future factory long regardless production rest the fire different. through where made down that still But in be weekends of and expect our going going isn't product that from, that's demand the unable and -- a really, is They to FX-XX. The

Tom Tekiele

for high-demand is very a significant But platform vehicle. us. a is says, It high-volume like it John and

that is a be point would up expectation will at production year. somewhat get there shutdown, some prolonged made Our that the if during

Operator

Please comes ahead. go John Nobile Brothers. question next Our with Taglich from

John Nobile

just could mentioned the change I think related due implementation. get was $XXX,XXX the in I know your to about XXXk SG&A FX, in line impact approximately here. ERP to costs If it and I back you to

you've had the cost next know ERP expect that. quarters SG&A just we quarters? want because going get feel few several So for on showing up a What for forward in I should to of I maybe

Tom Tekiele

we a going it's similar for is be system. even launch next little the John, quarters, year maybe bit before into next that think to few I number, early new

John Nobile

that's that about was run annual expected can to I sure And full just to business that Okay. XXXX. -- make booked. want $XX rate insight And still if at year, a that's last mentioned some I impact your into million how that, margins. not in the just to in going And new be but you lastly, get

I this I if impact way, going favorable quantify you don't even in business, them to think that. know a but can it's on

John Weinhardt

still launches -- QX year. it of next to primarily going is in It Yes.

of launches Some in I'm out in QX not some be it year year. there. the $XXX will of has because It be in be there this improvement of impact full its million so -- basis 'XX, margins. $XX about million. points million But definitely, should nearly modest changed nothing will impact sure how But the many $XX favorable.

Tom Tekiele

Yes. having footprint. it cost definitely our to We're some will that, cover facilities not add fixed of anything like or so

John Nobile

Okay.

So excited of percentage let's say, this year. a improvement the don't gross definitely -- get margins of X% modest well, because totally in the but of total

John Weinhardt

Correct.

Tom Tekiele

Yes.

John Nobile

than actually your understanding they percentage quantify vehicles sound percentage into my you went electric that this -- what could true products dampening years? maybe you a And use typical motor of sound-dampening if that is if use do is I motor you more was in wondering few knew electric they more actually sales vehicles, vehicles. currently where vehicle? it products see the and mean, than I

John Weinhardt

our product. it's combustion et tire to in battery other provides Yes, noise a noise, noise, more of electric in actually engine use even they and cetera, white they so vehicle, what do a that vehicle, engine the because masks amounts absent do road

my great percent not know a top it's revenues, but the our deal. head, off of I don't the as far As of

made advances There years or we're sold. increase from something I X%. of now, X% somewhat to a so still made of it's being hybrids. with the combustion engines, of at look not will probably are vehicles or that's say the in of total penetration on percentage expected electric other hugely penetration the five in even sales, next like because it's order percent But in still the as battery being If years, X% North And X somewhat. there even It's advances vehicles expected increase you with grow are talking low. quite vehicle other it to America over should

John Nobile

per Okay. little Well, not to going if the you anything, vehicle hurt increase in a with it's products. [Indiscernible] maybe bit

restructuring made to those third last I restructuring $XXX,XXX expenses us give this that don't going were any QX if mention had and expect prepared insight into question expenses quarters. we've in one Just remaining to in quarter. comments and know of because the you what had in QX quarter, you show second can and

Tom Tekiele

Yes.

probably was So little on the restructuring going would track to on over charges that. restructuring. a $XXX,XXX lower, a for higher, our in little close savings today. it a of could is It spend $XXX,XXX initial at be where that's $XXX,XXX and I we once be range million somewhere peg facilities little spend that $XXX,XXX between I'm the could $X we to still to but to about going good. outlook say generate in annual We're those

result of seeing some $XXX,XXX annual a So closings. the savings we -- will plant of second half of we as start that the year,

John Weinhardt

look, restructuring slightly be in up it more in cleaned QX. will whatever than costs There'll get QX But residual, QX.

John Nobile

Okay.

it most the expensed already was So first in quarter, of obviously.

half at XXXk, of already If to that you're about XXXk looking showed up.

to trickle then. start down it coming So in quarters will the

Tom Tekiele

the Correct, bat. and off right the you to book need severance whatnot costs because

Operator

further no Thank teleconference. concludes are you for your There today's participation. This questions.

time. your lines You at may disconnect this

Unique Fabricating (UFABQ) 11 May 182018 Q1 Earnings call transcript